An advisory body has urged the Hong Kong government to recognize digital currencies and invest in blockchain or distributed ledger technology (DLT) amid a wider FinTech-forward remit as it plays catch up to the likes of Singapore in the region.

Established in 2013, the Financial Services Development Council (FSDC) – an advisory body to the government – released a research report this week in a bid to push development of the FinTech sector in the country.

“Hong Kong has a world-class financial sector, but only a nascent FinTech sector,” an excerpt from the report read. “The aim should be to develop Hong Kong’s FinTech on a par with its mainstream finance, to secure a better future for the financial sector and for Hong Kong as a whole.”

The report highlights Mainland China as the model, “by far the world’s largest and most established FinTech market’, highlighting the use of FinTech payment methods among 40% of consumers.

A separate blockchain-specific FSDC report outlines a four-pronged strategy for Hong Kong to take a leap in blockchain development. It calls the government to create a “DLT lead function” supported by an advisory group comprising of industry and academics. This blockchain lead would be tasked to coordinate ‘public sector efforts on blockchain, engage regulatory support, promote and build DLT capability within the public sector’.

The advisory group also recommends the government install a DLT Hub as the focal point for the blockchain ecosystem to function as a center of knowledge, education and advocacy of the technology.

Putting the spotlight on digital currencies, the report adds that Hong Kong should introduce “a more solid regulatory footing” for digital currency firms operating in Hong Kong. Presently, bitcoin and other digital currencies are treated as virtual commodities and remain unregulated.

The advisory body notably recommends:

It would be desirable to recognize digital currencies, define the rights and obligations attaching to digital assets and liabilities, and establish an appropriate oversight regime.

The group specifically points out to toward the central bank digital currency endeavor taking shape in China. “Hong Kong needs in particular to capitalize on teh possible issuance of digital RMB overseas by the Mainland Chinese authorities in the context of RMB internationalization.” Such a move would help Hong Kong find firm footing as the ‘digital RMB payments rail in and out of Mainland China,” the FSDC added.

Finally, the group is pushing the government to develop its own blockchain proof-of-concepts (PoC), “to provide effective demonstration of blockchain’s capabilities and benefits and to attract talent to the territory.” Getting hands-on in developing and testing blockchain tech should be prioritized and backed with funding, the group added.